What a great time it was finishing residency. I could finally answer my friends with a “yes, I’m done,” after the never-ending questions regarding my apparent lengthy pursuit of knowledge. While this is nice, I assure you that a certain financial institution is equally aware that you are graduating residency. The sharks are definitely lurking.
I’ll make a generalization here and assume that most of you are carrying around $200,000 to $300,000 in loans at variable interest rates. Some of you may have started payments already. I deferred through residency, partially because the overbearing cost of being a stone’s throw from Manhattan for three years. For me, I wasn’t exactly excited to get the request for that first lovely little loan payment. It’s the first in a seemingly undefeatable army of monthly payments. Lucky for me, I did have an idea on how to manage it because of some great lectures I was privy to hearing during my residency. Helpful tip: USACS has a whole video series to educate physicians on financial planning.
What to do with the approaching seemingly fat paychecks? We’re human; buy something you want within reason … in my case, a Jeep. Rule one: No matter what, pay yourself first. Don’t jump on the so-called hedonic treadmill and get yourself upside down with a lifestyle you can’t afford and thus are a slave to. We’re doctors and, contrary to common belief, we aren’t rich. I assure you improper management of money will have you watching your dwindling accounts with disgust. How do you pay yourself first? The easiest way is to start with your retirement saving (I’ll explain in a minute). Rule two: Consider using your colleagues to find a great financial guy. You didn’t study medicine for ten years to handle the minutiae of maximizing your dollar. They went to school to study money. They are professionals. Let’s just say, they would ask for your help if they had to intubate.
There will be a storm of different financial mechanisms invoked by different groups trying to attract you young guns to their respective groups. Immediate partner! Signing bonus! High hourly rate! It’s enough to make your head spin. Knowing the right questions to ask is very important. Understanding the nature of how you are paid is very important. Reading your contract thoroughly is also very important. Certainly, consolidating loans or being slick with investments or real estate is a way of paying yourself. However, in the beginning (for most of you), the bulk of your future financial health will be determined by the amount coming in monthly and what percentage of this goes where. Paying yourself first means making your money work for you. Most of us aren’t aces in risky stocks and bonds. And you don’t need to be.
I started paying myself first by putting at least 10 percent of my monthly income into a 401K. Maximize your pretax dollars and start early. The money you save at an early age is worth a lot more than it is now, that’s a fact. The other way to pay yourself first is to work for a great company who has the financial health of their employees in mind, and thus facilitates making your money work for you. Why did I choose USACS? For starters: Excellent culture, supportive camaraderie and a robust track record. But let’s talk financial. Here are some of the financial benefits that led me to choose USACS:
1. I’m not an independent contractor! That high hourly rate offered by certain potential employers, when broken down, doesn’t add up when you are left alone to pay for health insurance, malpractice, disability insurance, etc.
2. USACS fully funds my 401k. In addition to my take home pay, USACS funds my 401k up to $34,500 a year (the current IRS max).
3. Excellent health benefits, disability insurance, etc. I like getting my paycheck and doing what I want with it.
4. There are investment options in the group itself once I’m a partner. USACS respects and pursues the concepts involved with true generation of wealth for its employees. Dave Scott has a series of videos dedicated to this. Once I was on board with the company, incredible resources were available to me to start truly building wealth.
Signing bonuses were tempting, but they are one and done. They are a bright firework with a fishhook trying to catch you. While they are nice, keep in mind they are essentially temporary. How will your employer continue to pay you the rest of your career?
During your interview process, compare and contrast your different options; be proactive. Ask for explanations of things. It’s ok to do that! You were pretty occupied all these years, and money may not have been your priority. I assure you, it’s definitely the top thing on your loan institution’s list. The right decisions now will have significant implications down the line. It can all be seamless and painless. Believe it or not, you can defeat that army of loan statements marching your way by making smart decisions early on with your first job outside of residency.